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Voluntary disclosure under imperfect competition: Experimental evidence

Author

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  • Lucy F. Ackert
  • Bryan K. Church
  • Mandira Roy Sankar

Abstract

This study investigates disclosure behavior when a manager has incentives to influence the actions of a product market competitor in a Cournot duopoly. Theoretical research suggests that under various conditions the manager has incentives to withhold some signals and disclose others. Using an experimental economics method, we find support for partial information disclosure. Our results suggest that when the manager receives private information about industrywide cost, unfavorable (favorable) information is disclosed (withheld) and the competitor adjusts production accordingly. In contrast, when the manager receives private information about firm-specific cost, disclosure behavior is not affected by the favorableness of the information and the competitor's production decision is invariant to the disclosure choice.

Suggested Citation

  • Lucy F. Ackert & Bryan K. Church & Mandira Roy Sankar, 1998. "Voluntary disclosure under imperfect competition: Experimental evidence," FRB Atlanta Working Paper 98-7, Federal Reserve Bank of Atlanta.
  • Handle: RePEc:fip:fedawp:98-7
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    References listed on IDEAS

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    1. Masahiro Okuno-Fujiwara & Andrew Postlewaite & Kotaro Suzumura, 1990. "Strategic Information Revelation," Review of Economic Studies, Oxford University Press, vol. 57(1), pages 25-47.
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    6. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-483, December.
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    8. Vives, Xavier, 1984. "Duopoly information equilibrium: Cournot and bertrand," Journal of Economic Theory, Elsevier, vol. 34(1), pages 71-94, October.
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    10. King, Ronald R. & Wallin, David E., 1995. "Experimental tests of disclosure with an opponent," Journal of Accounting and Economics, Elsevier, vol. 19(1), pages 139-167, February.
    11. repec:bla:joares:v:29:y:1991:i:1:p:96-108 is not listed on IDEAS
    12. Xavier Vives, 1990. "Trade Association Disclosure Rules, Incentives to Share Information, and Welfare," RAND Journal of Economics, The RAND Corporation, vol. 21(3), pages 409-430, Autumn.
    13. Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 380-391, Autumn.
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    Citations

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    Cited by:

    1. Jos Jansen & Andreas Pollak, 2015. "Strategic Disclosure of Demand Information by Duopolists: Theory and Experiment," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2015_09, Max Planck Institute for Research on Collective Goods.
    2. Jos Jansen & Andreas Pollak, 2014. "Strategic Disclosure of Demand Information by Duopolists: Theory and Experiment," Economics Working Papers 2014-20, Department of Economics and Business Economics, Aarhus University.
    3. David Kopanyi & Anita Kopanyi-Peuker, 2015. "Endogenous information disclosure in experimental oligopolies," Discussion Papers 2015-11, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    4. Liang Guo, 2009. "The Benefits of Downstream Information Acquisition," Marketing Science, INFORMS, vol. 28(3), pages 457-471, 05-06.
    5. Jos Jansen & Andreas Pollak, 2014. "Strategic Disclosure of Demand Information by Duopolists: Theory and Experiment," Working Paper Series in Economics 75, University of Cologne, Department of Economics.
    6. Kazunori Miwa, 2013. "The Impact of Mandatory Disclosure on Information Acquisition: Theory and Experiment," Discussion Papers in Economics and Business 13-01, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).

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    Keywords

    Information theory ; Microeconomics;

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